Contractual Matters

The Sinking and the Sunk

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For all of their accomplishments, the Yankees don’t generally fare well with spending efficiency. Using Marginal Dollars per Marginal Win—Doug Pappas’ yardstick to measure the bang for a buck a club gets out of its payroll—we find the Yanks spent $4.28 million per win in 2012, ranking 23rd among the 30 clubs in spending efficiency. That actually was an improvement from their rank of 25th in 2011 ($4.02 million per win) and 28th in 2010 ($4.23).

This is not so much an indictment of the Yankees’ front office—they’ve won an average of 95 games per year since 2010—as it is an inevitable result of the highest payroll in the game, mixed with slight regressions in production or injuries to a key high-paid player or two.

In fact, if you thumb through your new copy of Baseball Prospectus 2013 and line up the Marginal Dollars per Marginal Win figures contained in each team Prospectus Box, you find that no team with a payroll of $100 million or more ranked in the top 10 in spending efficiently last season. The most efficient of the $100 million clubs, the White Sox, ranked 12th, spending $2.31 million per win. Leading the field were two clubs light on high-priced free-agent talent: the Athletics, who paid a mere $890,000 per win, followed closely by the Rays, at $1.21 million.

The Yankees don’t figure to make a leap forward in the efficiency rankings this season, either, if PECOTA projections and payroll figures for 2013 are any guide. The explanation lies with one of the significant drags on salaries last year: Alex Rodriguez.

A-Rod posted a WARP mark of 1.2 in 2012 while earning $30 million, sparking a severe spike to the price the Yankees paid for each marginal win. At 37, he is recovering from a second hip surgery, and the Yankees still owe him $114 million through 2017—more than they did when they acquired him in 2004. PECOTA forecasts a 2013 WARP of 1.1 for Rodriguez, who will earn $29 million this season. If he is not a sunk cost already, he’s sinking fast.

The Yankees also are one of the few clubs with significant dead money on the books already for 2013. They’re on the hook for $8.5 million of A.J. Burnett’s salary this season, placing them among nine clubs—shown in the chart below—paying at least $1 million or more for players to work elsewhere this season.

But the inefficient spending surely won’t end there. A number of high-priced players carry the looming threat of sunk-cost potential for 2013. Here are the 20 players most likely to be financial landmines to their clubs this season. Each carries a combustible mix of a low WARP projection and an eight-figure salary. The list is limited to players making at least $10 million with a projected WARP above zero. (Jeff Francoeur and Jason Marquis, you’re off the hook!)

Barry Zito, Giants
2013 salary: $20,000,000Projected 2013 WARP: 0.1$ / Projected WARP: $200,000,000
Zito’s projected $200 million cost per win is an awful marriage of exorbitant cost and minimal production, and the sheer magnitude of his price to future earnings ratio dwarfs everyone else on the list. In a perverse twist, the Giants might need to monitor his workload this season. The $18 million option on Zito’s contract becomes guaranteed if he reaches 200 innings.

Vernon Wells, Angels
2013 salary: $24,642,857Projected 2013 WARP: 0.9$ / Projected WARP: $27,380,952
Wells announced this spring that he plans to retire after the 2014 season, prompting one less-than-kind Twitter user to wonder, “How will we be able to tell?” The Angels actually owe Wells just $21 million this season. (The balance of his salary figure is a share of his signing bonus, already paid by Toronto.) But Wells is hardly a bargain at that price, either. Conveniently enough, his deal comes off the Angels’ books after the 2014 season, just as Mike Trout will be heading to arbitration for the first time.

Alex Rodriguez
2013 salary: $29,000,000Projected 2013 WARP: 1.1$ / Projected WARP: $26,363,636
Rodriguez hopes to return from his hip injury by midseason. PECOTA projects him to hit 11 home runs in 247 plate appearances. If he manages to hit 13 and tie Willie Mays’ mark of 660, A-Rod would earn a $6 million milestone bonus and touch off the most curious celebration since Barry Bonds hit No. 756 in 2007.

John Lackey, Red Sox
2013 salary: $15,950,000Projected 2013 WARP: 0.7$ / Projected WARP: $22,785,714
In his second outing of the spring Friday, Lackey threw breaking balls for the first time as he continues his recovery from ligament-replacement surgery to his right elbow. So there’s that. There’s also another year to go on his contract—at a cost of another $15.95 million for 2014. But Boston has an opportunity to recoup some of Lackey’s value because the injury kicked in a club option for 2015 at the league-minimum salary—a savvy bit of negotiation that served as a model for similar language in Seattle’s recent extension for Felix Hernandez.

Alfonso Soriano, Cubs
2013 salary: $19,000,000Projected 2013 WARP: 0.9$ / Projected WARP: $21,111,111
The flip side of the February 2004 A-Rod trade, Soriano is just six months younger than Rodriguez. His relative health and 2012 rebound might make him an attractive trade target. However, Soriano would have to approve a deal, and the Cubs would have to swallow a large portion of the $38 million left on his deal.

Chris Carpenter, Cardinals
2013 salary: $12,500,000Projected 2013 WARP: 0.7$ / Projected WARP: $17,857,143
Despite his mixed results, Carpenter’s return to action at the end of the season was one of the more pleasant surprises of 2012. Sadly, the outlook for his return in 2013 is bleak.

Derek Jeter, Yankees
2013 salary: $17,000,000Projected 2013 WARP: 1.2$ / Projected WARP: $14,166,667
Jeter is 39 and returning from a broken ankle, but another 200-hit season could push him into heady company on the all-time list for career hits. He opens 2012 in 11th place with 3,304 hits, 210 shy of Tris Speaker, who is fifth all-time. Jeter’s contract includes a player option for 2014, so it’s not unreasonable to think Stan Musial’s mark of 3,630 might be within his reach. Then again, most mere mortals don’t play shortstop regularly at 39.

Johan Santana, Mets
2013 salary: $25,500,000Projected 2013 WARP: 2.2$ / Projected WARP: $11,590,909
An offseason of rest apparently has not fully cured what ailed Santana’s shoulder, and he’s now stalled in a long-toss program and unlikely to be ready for Opening Day. Though this is the final guaranteed year of his $137.5 million contract, the Mets will pay another $5.5 million to buy out a 2014 option.

How did you miss Ryan Howard? Projected 2.2 WARP (which seems generous, WAR projections range from 0.9 to 1.5) and $20 million in pay this season which escalates to $25 million from '14-'16 and THEN includes a $10 mil buyout or $23 million option for '17.

Yes. I limited the dead money here to guaranteed salaries for the 2013 season.

When the Mets released Bonilla in 1999, he agreed to defer his $5.9 million salary for 2000 at 8 percent interest. He received the first of 25 annual payments of $1.193 million in 2011. Details are not always public, but deferrals are not uncommon - Albert Pujols, Scott Rolen, Ryan Dempster, Andruw Jones are just a few players who have agreed to similar arrangements in the past. Most clubs can manage the money in a such a way that it works for both sides.

Isn't there a huge difference between paying someone whose poor production makes him an albatross, such as Vernn Wells and Barry Zito, and paying someone who was iinjured on the job giving everything he had for the team?

Regarless of the fact that I despise the Yankees, Derek Jeter is NOT at all a "sunk cost" in the sense of those who no longer can pull there weight. Rather, Jeter is a wounded warrior, injured because he continued playing far longer than he should have on his bum ankle, giving his own body up far the cause of his team. He certainly does not belong in this discussion.

The same can be said for Johan Santana, who literally had his arm sacrificed so the Mets could glory in the first ever no-hitter. Or Chris Carpenter, or any of the others sidelined while suffering injuries on the job.

Maybe some here have the gall to refer to our wounded war veterans as a "sunk cost" on society. But that would only be a comment on who you really are inside, not at all on those service men and women.

i will even include eveyone's favorite whipping boy, A-Rod, as one who suffers now after injury himself in the interests of the game of baseball. What makes fans believe that it is right to sneer and snort like Romans watching the lions devour the Christians, every time they see a ball player's body break down after years of providing entertainment for us?

Not only was the value of the injured players diminished in the service of the team, but in most cases the cost of their contracts are NOT even sunk costs at all.

The teams can recover the salary lost to injuries through insurance they carry. However, If the team chose not to insure its contracts, then it made a calculated decision to save the premium and accept the risk of financial loss in case of injury.

In that case, teams deserve no more sympathy than you or I would if we were greedy to the point of refusing to pay the premium for homeowners insurance while living in the path where hurricanes frequently come.